Accounting Theory Solution Chapter 2

2625 WordsMay 7th, 201211 Pages

Questions
1.‘A theory that is purely syntactic is sterile.’ Comment. How can this statement relateto accounting?
A syntactic theory is one that is capable of testing on the basis that it is valid in terms of itslogical consistency. Thus the calculation of accounting profit and determination of assetvaluation can be valid in relation to their conformity with rules prescribing the measurementof accounting profit and asset valuations. This can be described as sterile as it does notnecessarily relate to the real world. Historical cost accounting has been represented as being purely a syntactic theory, with the semantic inputs to the system being the transactions andexchanges recorded in the accounting system, which are then aggregated and…show more content…

4.Give two examples of accounting ‘doublethink’. How do traditional accountantscounter this criticism?
•The practice of summing together assets using different valuation methods and believing that the sum (total assets) is an exact measure of asset ‘value’
•The practice of using conservative accounting techniques and different allocation techniques to derive net income, which is then compared acrossdifferent industries
•Accountants counter by arguing that the purpose of accounting is to match (allocate)historical costs, and is not a measurement system. Also, accountants argue that diversetechniques are required to account for different business situations.
5.(a)What is normative accounting? Give two examples of the major issues debated inthis area.
(b)Do you think that the effects of inflation on financial statements are important?Why or why not?
(a)Normative accounting research is more concerned with policy recommendations and withwhat should be done in contrast to explaining why current practice is carried out in themanner that it is. Normative theorists usually attempt to derive either the ‘true income’ or adopt the‘decision-usefulness’ approach whereby accounting reports are an input into users’decisions (for example, to buy or sell shares, and management decisions on the financialwealth of firms).The major issues are the impact of the changing…

CHAPTER 2
SOLUTIONS TO B EXERCISES
EXERCISE 2-1B (15–20 minutes)
(a) True.
(b) False – General-purpose financial reports helps users who lack the ability to demand all the financial information they need from an entity and therefore must rely, at least partly, on the information in financial reports.
(c) False – Standard-setting that is based on personal conceptual frameworks will lead to different conclusions about identical or similar issues. As a result, standards will not be consistent…

Chapter 10
Plant Assets, Natural Resources,
and Intangibles
QUESTIONS
1. A plant asset is tangible; it is used in the production or sale of other assets or services; and it has a useful life longer than one accounting period.
2. The cost of a plant asset includes all normal and reasonable expenditures necessary to get the asset in place and ready for its intended use.
3. Land is an asset with an unlimited life and, therefore, is not subject to depreciation. Land improvements have…

MONASH UNIVERSITY
SEMSTER 1 – YEAR 2011
AFW 3040 – ACCOUNTING THEORY
BY: SARAH WONG
Assignment 2 – 1500-word Essay
Topic: How social and environmental reporting practices undertaken by companies highlight the limitations of the conceptual framework.
Introduction:
Accountancy has always been concerned with mainly the accountability of directors to shareholders and companies to creditors. As companies grow larger and become more integrated with the society, this call for a focus towards sustainability…

Chapter 1
Managerial Accounting:
Tools for Decision Making
Discussion QUESTIONS
Q1-1. Financial accounting is oriented toward external users and is concerned with general-purpose financial statements. These financial accounting statements are highly aggregated, report on relatively long time periods, are oriented toward the past, and must conform to external standards. These standards emphasize the use of objective data.
Management accounting is oriented toward internal users and is…

CHAPTER 3
Product Costing and Cost Accumulation in a Batch Production Environment
ANSWERS TO REVIEW QUESTIONS
3-1 (a) Use in financial accounting: In financial accounting, product costs are needed to determine the value of inventory on the balance sheet and to compute the cost-of-goods-sold expense on the income statement.
b) Use in managerial accounting: In managerial accounting, product costs are needed for planning, for cost control, and for decision making.
c) Use in cost…

Assignment 4-2: Week 4 Analysis Write-Up
Kylie Keener
ACCT715-Q1WW
Financial Accounting Theory
Michael Miller
13 June 2012
1. Chapter 4: Problem 8 (GM)
The article “GM to Take Charge of $20.8-Billion” here reproduced from The Globe and Mail (February 2, 1993) describes the potential impact of SFAS 106, “Accounting for Postretirement Benefits Other Than Pensions,” on General Motors and Ford. For example, it appears that General Motors will be required to record a liability of $20.8 billion…